Legislative Politics

Abnormal Returns From the Common Stock Investments of Members of the U.S. House of Representatives

May 25 '11

Alan Ziobrowski, James Boyd, Ping Cheng, and Brigitte Ziobrowski write:

A previous study suggests that U.S. Senators trade common stock with a substantial informational advantage compared to ordinary investors and even corporate insiders. We apply precisely the same methods to test for abnormal returns from the common stock investments of Members of the U.S. House of Representatives. We measure abnormal returns for more than 16,000 common stock transactions made by approximately 300 House delegates from 1985 to 2001. Consistent with the study of Senatorial trading activity, we find stocks purchased by Representatives also earn significant positive abnormal returns (albeit considerably smaller returns). A portfolio that mimics the purchases of House Members beats the market by 55 basis points per month (approximately 6% annually).

Interesting. No graphs whatsoever and I don’t have the energy to try to read all the little numbers. But I’ll put it out there for you to evaluate.